Hong Kong Monetary Chief Calls For Review Of Financial Stability

by Mary Swire, Tax-News.com, Hong Kong

07 July 2008

With New York and London reviewing their financial-stability arrangements, Hong Kong should also reassess its system, Monetary Authority Chief Executive Joseph Yam says.

In his regular 'Viewpoint' column for the HKMA website, Yam said financial authorities in developed markets have been devoting attention to the establishment of an effective framework for financial stability.

He noted that the authorities in the US and UK, the top two international financial centres, have taken the view their central banks can play a greater role.

While Yam says that Hong Kong has a fairly robust framework, he argues that there may still be scope for improvement.

"I think there is a need for us to examine in detail the financial-reform agendas of other jurisdictions and monitor developments on this front closely," Yam said.

"For example, although Hong Kong already has a framework for the provision of liquidity to the financial system when it is under stress, similar to what is being envisaged in the proposed reform measures in the US and UK, there is always scope for refinement at both the policy and operational levels," he observed.

"Without suggesting the existing arrangements are in any way inadequate, questions can be asked about whether the established liquidity-support mechanism for the banking system should be extended to other institutions crucial to the systemic stability of the financial system, or whether the provision of liquidity should continue to be dealt with case by case," Yam concluded.

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